USD/JPY – Yen Slightly Lower Despite Strong Japanese Current Account

The Japanese yen has moved slightly lower on Monday. Currently, USD/JPY is currently trading at 102.30. On the release front, Japanese Current Account improved to JPY 1.65 trillion, beating the estimate. In the US, the sole event on the schedule is the Labor Market Conditions Index. The indicator has recorded five straight declines. Will we see a move into positive territory?

Japanese indicators started the week on the right foot, as the current account surplus jumped to JPY 1.65 trillion, up from JPY 1.45 trillion a month earlier. This figure beat the forecast of JPY 1.60 trillion and marked a 3-month high. If the yen continues to strengthen, however, we could see lower surpluses. Last week, Prime Minister Shinzo Abe’s cabinet approved a JPY 28 trillion stimulus plan, and the yen posted some gains before retracting. The package includes JPY 13.5 trillion of fiscal measures, with new spending to commence this year. Will this be enough to kick-start the languishing economy? It will be a tough task to convince the Japanese consumer, who remains deeply pessimistic about the economy and will be reluctant to loosen her purse strings. The government isn’t getting any help from the Bank of Japan, which has refrained from utilizing its major monetary tools – lowering interest rates or expanding its asset-purchase program. Is the BoJ out of monetary ammunition? If so, the yen could gain more ground and move closer to the symbolic 100 level.

Sharp US employment numbers on Friday pushed the dollar higher, as USD/JPY climbed above the 102 level. Nonfarm Employment Change, one of the most important indicators, surprised the markets with a huge gain of 255 thousand, crushing the estimate of 180 thousand. US wage growth has been a soft spot in the robust labor market, but there was positive news as Average Hourly Earnings gained 0.3%, edging above the forecast of 0.2%. As well, Unemployment Claims remained steady at 4.9%. These strong numbers will likely increase the odds of a September rate hike by the Federal Reserve. The Fed has made no secret of the fact that any rate move will be data-dependent, and upcoming employment and inflation reports will be critical factors in the Fed’s decision. The recent US GDP report, which was much softer than expected, had dampened speculation about a rate hike before next year, but the stellar job numbers has increased the likelihood a move by Fed before the end of the year.

USD/JPY Fundamentals

Sunday (August 7)

• 19:50 Japanese Current Account. Estimate 1.60T. Actual 1.65T
• 19:50 BOJ Summary of Opinions
• 19:50 Japanese Bank Lending. Actual 2.1%

Monday (August 8)

• 1:00 Japanese Economy Watchers Sentiment. Estimate 42.6. Actual 45.1
• 10:00 US Labor Market Conditions Index
• 19:50 Japanese M2 Money Stock. Estimate 3.3%
• 23:45 Japanese 30-year Bond Auction

*Key events are in bold

*All release times are EDT

USD/JPY for Monday, August 8, 2016

USD/JPY August 8 at 7:10 EDT

Open: 102.04 High: 102.46  Low: 101.90 Close: 102.32

USD/JPY Technical

• USD/JPY was flat in the Asian session and has posted slight gains in European trade
• 102.36 is under strong pressure in resistance and could break in the Monday session
• 101.20 is a strong support line
• Current range: 101.20 to 102.36

Further levels in both directions:

• Below: 101.20, 99.71 and 98.95
•  Above: 102.36, 103.73, 104.99 and 105.87

OANDA’s Open Positions Ratio

USD/JPY ratio is showing long positions with a strong majority (74%), indicative of trader bias towards USD/JPY continuing to move to higher ground.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.